Huge news landed for one of the biggest names in cryptocurrency, Coinbase (NASDAQ: COIN), sending the stock higher in today’s trading session so far. The news that lit such a spark under Coinbase was simple enough: Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) stepped in. Specifically, Google announced that it would allow some of its customers to use cryptocurrency to pay for its line of cloud services. Such a service will start next year, and Google will use an integration with Coinbase Commerce to cover the receiving functions.
Further, Google’s connection to Coinbase will also expand from there. Google will turn to Coinbase’s custody service, Coinbase Prime, for some functions.
I recently shifted to neutral on Coinbase, suggesting that I could go bearish at any time. This bit of news puts off the bear and opens up a whole new hope for Coinbase. I remain neutral, though, as it’s going to take some time to see how the effects of this latest move impact the overall field.
Investor Sentiment is Better Than You Might Think
The Google move has introduced some cautious optimism, but the investor sentiment figures were already feeling fairly optimistic about Coinbase. Coinbase has a 7 out of 10 Smart Score on TipRanks right now. That’s the highest level of “neutral” and suggests that Coinbase has a slightly better than even chance of outperforming the broader market.
That’s good news for COIN investors, and the word from inside the company also looks pretty bright. Insider trading at Coinbase has been almost universally positive for the last three months.
Though there hasn’t been an informative transaction in the last five months, when director Frederick Ehrsam bought $1.8 million worth of Coinbase shares, the aggregate tells us some noteworthy facts.
In the last three months, insiders sold stock just three times. All of those sales took place in July, so no insider has sold shares since then. Insiders bought stock, however, 17 times. That’s an impressive ratio right there.
The last 12 months are a bit of a different story, however. Insiders sold stock 34 times yet bought stock 42 times. Buyers still outpace sellers over the last 12 months, but by nowhere near as wide a margin.
A Huge but Uncertain Step
This is a huge step. That much can’t be denied. Any time Google gets involved in something, its sheer gravity as a company ensures that whatever it does becomes a big deal.
It’s like the halo effect, only much, much larger. For Google to get involved in the crypto market in such a way can shake it up beyond all recognition.
Google’s involvement with Coinbase not only improves Coinbase’s near-term future but also gives the entire crypto market something it’s been needing for years now: legitimacy. Cryptocurrency spent a lot of time laboring under the misapprehension that it was little more than a convenient money laundering operation.
It was regarded as little more than a criminal’s tool, a great way to quietly buy drugs, weapons, and who knew what else. Many of its nobler aspirations were just quietly swept under the rug. Its potential utility in cross-border commerce was disregarded and often ignored as “overcomplicated.”
However, with Google involved, suddenly, there’s a whole new legitimacy. While it’s not quite as useful as, say, Walmart (NYSE: WMT) accepting Bitcoin (BTC-USD) for shirts and televisions, it’s still a huge name in the computing industry taking the cryptocurrency concept seriously.
That’s where the problem with this development comes in.
Google is a major name, but Google is also something of a specialist name. This isn’t people able to pay for songs on Google Play with Dogecoin. This isn’t YouTube TV taking Litecoin (LTC-USD) for subscription fees.
This is people able to pay for some of Google’s most specialized features—cloud computing system access—with crypto. There are plenty of people out there who don’t even know what cloud services are, let alone that Google has them.
After all, total IT spending on cloud-based systems is just 6% of the whole as of December 2021. People may use cloud services, but understanding them isn’t always clear.
That’s not all that’s driving Coinbase, though. There are ups and downs beyond Google’s involvement to consider. Late yesterday, word emerged that Coinbase managed to land a license to operate in Singapore. Now, Coinbase can offer payment services fully approved by the central bank authorities therein.
However, just this morning, we discovered that the G-20 organization may lead to Coinbase being forced to break up. Watchdog groups are increasingly clamoring for more reforms in the cryptocurrency market that may destabilize the concept so hard that it’s unrecognizable from what we know today.
Is COIN Stock a Buy or Sell, According to Analysts?
Turning to Wall Street, Coinbase has a Hold consensus rating. That’s based on eight Buys, seven Holds, and four Sells assigned in the past three months. The average Coinbase price target of $92.06 implies 27% upside potential.
Analyst price targets range from a low of $42 per share to a high of $220 per share.
Conclusion: The Start of Something (Probably) Big
There’s no doubt that Google getting involved in Coinbase is going to be a leg up for Coinbase. Google’s involvement should dispel the last surviving remnants of the notion that cryptocurrency is nothing but a way to buy drugs and weapons over the internet. It’s also going to give Coinbase an extra cachet in terms of providing cryptocurrency services. Good enough for Google will likely be good enough for many other users.
However, here’s the thing. We don’t know just what kind of long-term impact this will have. It could be a brief flash in the pan that’s over quickly. After all, Google is right now limiting this to a comparatively narrow segment of its user base. That means that the impact may not go all that far, to begin with.
With Coinbase’s share price hovering between its average and its low price target, it’s not offering a tempting entry point, at least not for some investors looking for a bargain. At this point, Coinbase could go either way.
That’s enough to leave me neutral; a return to average, thanks to the Google connection, wouldn’t surprise me. Fewer people caring about the Google connection than expected wouldn’t surprise me, either. With so much uncertainty around the stock right now, holding on and keeping your distance may be the best play.
